Real Estate Predictions for 2023
Local experts foresee stability and a return to normal in the year ahead
After three wildly unpredictable years of activity (the oft-overused “unprecedented” definitely applies), San Diego real estate professionals agree: that chapter has ended. While sellers and borrowers may be lamenting the departure of sky high demand and cheap money, respectively, stability is nevertheless being welcomed with open arms by agents who remind us that this is what “normal” looks like, even in a luxury micro-market like ours.
Meet the Experts:
Bree Bornstein, The Bornstein Group
Delorine Jackson, The Jackson Team
Garret Milligan, Compass
Linda Sansone, Linda Sansone & Associates
No More Drama
Perhaps the biggest story — and the best news — in real estate is the closure of an era marked by activity that often defied logic. “It’s not the feeding frenzy of going on the market on Friday and showing Saturday and Sunday and offers Monday way over asking,” says Garret Milligan of Compass in Rancho Santa Fe. “The market stabilizing is going to be the trend for 2023.”
“It was at such an unusual pace with things going over ask with 20 offers. That, we’re not seeing anymore,” echoes Bree Bornstein of The Bornstein Group. Even with what is still, by all accounts, very limited inventory, buyers aren’t leaping in if a property’s price exceeds its value, and they’re not caving to the pressure when there’s interest from multiple parties. “Clients are not open to bidding wars,” acknowledges Delorine Jackson of The Jackson Team, who offers an example where buyers interested in a recent property for sale backed out when they learned there was competition. “The buyers [were] saying, ‘We’re not going to go there,’” she says, though not with disappointment. “I think it’s good. It’s making our market very healthy.”
Though it’s an adjustment that can sometimes be more difficult to convince sellers to make, especially after a period when they could essentially name their price, the more a property’s price is in tune with what today’s more patient buyers will tolerate, the better. “If it’s priced right, it’s going to sell,” says Bornstein.
Say Goodbye to the Fixer-Upper
Just as buyers are wielding more power regarding when they buy, they’re also dictating what’s going to sell. “Buyers just want to move in and they don’t really want to do anything” to improve the property once they take possession, says Milligan. But the demand for turnkey properties doesn’t just benefit buyers with a move-in ready supply; savvy sellers ready to do the work are also benefiting. “In this market where there’s a price shift a little bit, if the house is done, and it feels current with what’s on-trend, that house sells at ask or above, and it sells quickly,” says Bornstein. What does “on-trend” mean now? “Lots of natural light. Lighter finishes. Not necessarily an all-white kitchen, just the ‘California clean’ look,” she says.
The Predictions That Weren’t
“I’ve been pleasantly surprised because of all the negativity that I’ve heard on the news about how the market was going to be very slow, and what I’m finding is the market is actually pretty busy at all price points in Rancho Santa Fe,” says Linda Sansone of Linda Sansone & Associates. “I think everyone was thinking that ‘doom and gloom,’ and that’s not the case.”
Wall Street forecasted the spike in interest rates targeted to temper inflation would lead to a real estate downturn, but that’s just not playing out. While interest rates have climbed steeply compared to their historic lows last year, now at around six percent, they’re still well within what is considered to be a normal range (in 1981, for instance, the average annual rate was an astronomical
16.63 percent, according to Freddie Mac). “Now, as we’ve kind of stabilized and gotten into the new year, I think buyers are realizing the world is not ending and the housing market in San Diego, especially in North County, is not crashing, [and] the media is essentially making mountains out of molehills,” observes Milligan.
While Sansone acknowledges that some sluggishness on both sides may reflect a reluctance to re-enter the market at today’s higher rates, especially if any current financing they have is at a lower rate, it doesn’t necessarily have the impact here it might have in other markets. To put it bluntly, mortgage rates don’t matter to those who aren’t financing. “My people are paying cash,” says Bornstein. “The interest rates don’t really affect people in my price point. In the luxury market, it’s not an issue.”
However, adds Sansone, “I think even cash buyers are still cautious about buying and making sure they’re not overpaying. Buyers still want a good deal. That hasn’t changed.”
We’re Still Unique
Our experts call ours a “micro-market” for a reason: What happens here doesn’t always reflect what’s happening elsewhere. In addition to being more resistant to the pressures of fluctuating lending rates, it’s simply one of the most desirable areas to live in the entire country. “I think we’re still getting a lot of influx,” says Bornstein. “I’m seeing a lot of [people from] the Bay Area, a lot of L.A. The last ten deals I’ve done have been with people from out of the area.”
The gist? The “correction” has come to North County. “There are buyers who say they’re going to wait and see what happens, and quite frankly, I think they’re going to be mistaken and they’re [going to] look back and say ‘I wish I didn’t wait,’” says Milligan. “People want to move and need to move, so even if somebody buys now and prices go down a little bit, historically, it’s going to go back up. We live where people vacation!”